Tuesday, 7 June 2016

UPND Manifesto: Reducing Inequality

We continue our review of the UPND 2016-21 manifesto. It sets out a ten point plan to govern and develop Zambia. Here is our assessment of their second policy promise to "reduce inequality”.

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What are the main specific proposals?

The UPND promises to “reduce inequality” through undertaking four actions : a) growing the economy because “we cannot share poverty”; (b) delivering food security through long term planning and forecasting; (c) stringent laws and regulations against Gender Based Violence (GBV); and, (d) putting measures in place “to protect the vulnerable in our society [including] women and youth”.

What is the rationale for the proposals?

The UPND believes that “most Zambians have not seen the benefits of past economic growth”. It notes that “poverty levels remain very high”. It also suggests that there has been a “recent increase in the cost of living”, which inevitably means “more people will be dragged into poverty if we do not take action”. The UPND would like to see Zambia move forward on “the path towards fairness and prosperity”.

What is our main assessment?

Evaluating this manifesto commitment is slightly problematic because the UPND bizarrely does not define what they actually mean by “inequality”. There are different forms of inequality in society (e.g. political, income, social, spatial, etc). Scholars even distinguish between different forms of equality, for example, equality of outcomes versus equality of opportunity. Our best guess based on the reference to “poverty levels” is that UPND are primarily focused on reducing income inequality.

It is certainly true that no one who has recently travelled the length and breadth of the country can deny that there are two Zambias. There's a Zambia for the rich (around Lusaka with its booming construction), along with Kitwe and other thriving towns. Then we have the rest of our destitute and forgotten people who occupy 70% or so of the periphery and continue to wallow in poverty.

The poor don't watch television because they have no electricity. Their children walk huge distances just to get to school. They live to survive the next day. They are the voiceless masses, usually under the thumb of a chief who acts as a party cadre for the government of the day. Many of these areas are literally isolated from civilisation and frankly it is difficult to see how development will ever reach them.

This view of two Zambias is backed up by data that shows income inequality remains very high in Zambia, with recent studies suggesting the Gini coefficient, somewhere around 0.67. This has actually worsened over the last 20 years. The UPND is therefore right that the gains from general economic growth in the country are not helping close the income inequality gap. Economic growth is making a small group of people grow richer at much faster pace than the majority.

High income inequality is a problem because empirical evidence now shows that economic growth could be unsustainable in the long term without policies that reduce the income divide between members of society or at-least prevents a widening of the divide. It is therefore necessary to ensure that pro-growth policies go hand in hand with social and income equality goals.

These policy linkages are important because income inequality has important implications for social cohesion i.e. whether we as a society feel more as one nation with common interests. Social cohesion is important because a more united nation would be able to have internal peace and its citizens would lead happier lives.

In our case a more socially cohesive Zambia would prevent people saying “we want Western province independent". This is why responsible governments generally pursue policies that encourage civic engagement through initiatives such as devolved decision making and greater voter participation.

Unless we as a society are more cohesive, the problems of crime, calls for secession and general disorder would not be easily eliminated. When people see others more richer than them and large international corporation taking away their land, while they wallow in poverty, they will crave those things and at times resort to disorder.

So the UPND is right to prioritise reduction in income inequality, assuming that is what they are actually focused on. The problem is that their assessment is shockingly weak in two areas.

The first problem is that the UPND does not seem to have a clear understanding of why Zambia is suffering from high income inequality. What is the root cause of our income inequality? There is no discussion anywhere in the manifesto of this question. Without understanding why our society is increasingly unequal we cannot have any confidence that UPND has the right solutions.

UPND’s failure to understand why Zambia is unequal leads us to its second problem. The manifesto fails to answer the basic policy question it is meant to address : what kind of investments are required to close the inequality gap and raise the majority of Zambians out of poverty? Instead it is littered with basic errors.

UPND allegedly believes that inequality is the problem yet, it suggests as its top prescription “growing the economy” because “we cannot share poverty”. But if the economy is already growing, as already asserted, and inequality is rising, how does growth help tackle inequality?

Another UPND solution to income inequality is “delivering food security”. Yet more food security will not increase incomes for the poorest! Similarly, “stringent laws and regulations against Gender Based Violence” are good for the vulnerable but they won’t increase incomes.

Sadly, the conclusion one reaches is that UPND has no coherent and tangible proposals to reduce income inequality in Zambia at present.

The key to dealing with income inequality in Zambia is to first recognise that part of the problem is historic. Economic growth in Zambia has been historically concentrated in the mining sector which are capital intensive, meaning they create little domestic employment.

Mining has also been poorly taxed with only a small share of the profits is retained in the country and used to reduce poverty. This is why we have places like Mufulira’s mining townships which for years have borne the full brunt of the environmental damage.

In Mufulira’s Kankoyo, only two things grow there : avocado trees and cactus. In exchange for this damage the economic input consist of open sewers, dilapidated shacks with tin roofs corroded by acid rain, abandoned pharmacies, and grocers’ shops with broken windows. That is the legacy of many mining companies. When the mines eventually close, is this all they'll leave behind. This is at the heart of our income inequality.

The flip side of having a mining sector with limited employment opportunities has meant that the majority of our population continue to depend on small-scale and informal agriculture. Until the renewed push by the Sata administration, there had been little investment in public infrastructure. Agricultural productivity has continued to remain low and households have remained cash poor.

For many our poor people in rural areas, escape from poverty comes only through come through agricultural asset accumulation and commercialization. Others escape poverty through investment in secondary and higher education of children which translates, in the next generation, into high-paying non-farm employment. What tends to trap households in chronic poverty, are things like health shocks to adult household members, mortality of prime-age adult and high family dependency.

The current government has rightly continued to prioritise continued public investments that are seeking to accelerate upward trajectories out of poverty through investments in rural education, public health, feeder roads , improved market access and social cash transfer programmes. We have seen unprecedented investment in these areas.

However, more needs to be done in ensuring agricultural technology and management of human and livestock diseases. We also need greater emphasis on policies that facilitate land consolidation, input supply, an inclusive financial system and market competition in order to enhance the rural growth dynamic. All of this needs to be supported by a long term educational system that reaches both girls and boys; making sure that all the citizens, no matter what the income of the parents, are able to live up to their potential.

More widely, dealing with income inequality requires ensuring that we have a fair deal from mining companies. It means recognising that income inequality is a political problem as much as an economic one. We must break the dominance of big mining companies and other foreign corporations in how economic policy is conducted in this country. The new constitution with its progressive clauses on campaign finance regulation should help in this area.

These are the areas UPND should be focusing on. Sadly page 10 of the new UPND manifesto has not convinced us that UPND has a plan to "reduce inequality".

1 comment:

I would think one problem could be the system of representative democracy itself.

If people could vote for major laws or expenditures directly by referendum, the allocation of resources would look very differently.

There might also be a lot more scepticism about taking on debt from the IMF. Or a lot fewer vanity projects by national government politicians, which is an international phenomenon.

Another problem is the international landscape. The fact that the mining companies (Anglo-American De Beers, Rio Tinto, GlencoreXstrata) are owned by the same trillionair families who control the World Bank and IMF.

That means there is a conflict of interest, every time the Zambian or any other government sits down and negotiates with the IMF.

The same family practically invented the Eurobonds, which now constitute much of Zambia's debt. Why did the IMF never object to the issuance of these bonds? Were they unaware of the history of the people in charge of government? Or didn't they care? And now, like always, they want to reduce subsidies to the public.

If at any stage there were inducements paid, the debt might be illegal. Bribing foreign officials is also illegal for at least US and Canadian nationals, through the FCPA.

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